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UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.




ILLINOIS DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION

DIVISION OF BANKING

SPRINGFIELD, ILLINOIS




	 	 	 
	Written Agreement by and among
	 	 
	 
	 	 
	CENTRUE FINANCIAL CORPORATION

	 	Docket Nos. 09-192-WA/RB-HC
	Clayton, Missouri

	 	09-192-WA/RB-SM
	 
	 	 
	CENTRUE BANK

	 	2009-DB-106
	Streator, Illinois
	 	 
	 
	 	 
	FEDERAL RESERVE BANK OF CHICAGO
	 	 
	Chicago, Illinois
	 	 
	 
	 	 
	and
	 	 
	 
	 	 
	ILLINOIS DEPARTMENT OF FINANCIAL
	 	 
	AND PROFESSIONAL REGULATION,
	 	 
	DIVISION OF BANKING
	 	 
	Springfield, Illinois
	 	 






     WHEREAS, Centrue Financial Corporation, Clayton, Missouri (“Centrue”) is a registered bank
holding company that owns and controls Centrue Bank, Streator, Illinois (the “Bank”), a state
chartered bank that is a member of the Federal Reserve System, and various nonbank subsidiaries;



     WHEREAS, in recognition of their common goal to maintain the financial soundness of Centrue
and the Bank, Centrue, the Bank, the Federal Reserve Bank of Chicago (the “Reserve Bank”), and the
Illinois Department of Financial and Professional Regulation, Division of



 









 





Banking (the “Department”) have mutually agreed to enter into this Written Agreement (the
“Agreement”); and



     WHEREAS, on December 1, 2009, Centrue’s and the Bank’s boards of directors, at
duly constituted meetings, adopted resolutions authorizing and directing Thomas A. Daiber
 to consent to this Agreement on behalf of Centrue and the Bank,
respectively, and consenting to compliance with each and every applicable provision of this
Agreement by Centrue, the Bank, and their institution-affiliated parties, as defined in sections
3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. §§
1813(u) and 1818(b)(3)).



     NOW, THEREFORE, Centrue, the Bank, the Reserve Bank, and the Department agree as
follows:



Risk Management




     1. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the
Department an acceptable written plan to strengthen risk management practices. The plan shall, at a
minimum, address, consider, and include:



          (a) The responsibility of the board of directors to
establish appropriate risk tolerance guidelines and risk limits;




          (b) procedures to periodically
review and revise risk exposure limits to address changes in market conditions;




          (c) strategies to
minimize credit losses and reduce the level of problem assets;




          (d) procedures to identify, limit,
and manage concentrations of credit that are consistent with the Interagency Guidance on
Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, dated December
12, 2006 (SR 07-1), including, but not



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limited to, establishment of concentration of credit risk tolerances or limits by types of loan
products, geographic locations, and other common risk characteristics; and




          (e) procedures for the
continued review, on a quarterly basis, of the Bank’s investment securities to assess impairments
and ensure that impairment analyses, including recognition of Other Than Temporary Impairment, are
in accordance with generally accepted accounting principles, including FASB Staff Position (FSP)
FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other Than Temporary Impairments, and regulatory reporting
instructions.




Lending and Credit Administration




     2. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the
Department an acceptable enhanced written lending and credit administration program that shall, at
a minimum, address, consider, and include:



          (a) Standards for interest-only loans;




          (b) appropriate
use of interest reserves;




          (c) incentive compensation standards for loan origination employees and
their direct and indirect supervisors that:





	 	(i)	 	do not encourage employees to take excessive risks
on behalf of the Bank;
	 
	 	(ii)	 	are compatible with effective controls and risk management; and
	 
	 	(iii)	 	incorporate strong corporate governance principles;





          (d) enhancements to the appraisal policy that
include, but are not limited to:





	 	(i)	 	specific guidelines on appraisal and evaluation requirements
that are consistent with regulatory requirements;





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	 	(ii)	 	written standards for when reappraisals and reevaluations must be conducted; and
	 
	 	(iii)	 	revised appraisal review procedures to ensure the quality of appraisals;





          (e) enhancements to the internal loan grading system to ensure timely and accurate risk ratings;




          (f) periodic assessment of
the loan review program, including the adequacy of staffing levels; and




          (g) improved reporting and
management information systems.




Asset Improvement




     3. (a) The Bank shall not, directly or indirectly, extend or renew any credit to or for the
benefit of any borrower, including any related interest of the borrower, who is obligated to the
Bank in any manner on any extension of credit or portion thereof that has been charged off by the
Bank or classified, in whole or in part, “loss” in the report of the examination of the Bank
conducted jointly by the Reserve Bank and the Department that commenced on June 8, 2009 (the
“Report of Examination”) or in any subsequent report of examination, as long as such credit remains
uncollected.



          (b) The Bank shall not, directly or indirectly, extend or renew any credit to or for the
benefit of any borrower, including any related interest of the borrower, whose extension of credit
has been classified “doubtful” or “substandard” in the Report of Examination or in any subsequent
report of examination, without the prior approval of the board of directors. The board of directors
shall document in writing the reasons for the extension of credit or renewal, specifically
certifying that: (i) the extension of credit is necessary to protect the Bank’s interest



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in the ultimate collection of the credit already granted or (ii) the extension of credit is in full
compliance with the Bank’s written loan policy, is adequately secured, and a thorough credit
analysis has been performed indicating that the extension or renewal is reasonable and justified,
all necessary loan documentation has been properly and accurately prepared and filed, the extension
of credit will not impair the Bank’s interest in obtaining repayment of the already outstanding
credit, and the board of directors reasonably believes that the extension of credit or renewal will
be repaid according to its terms. The written certification shall be made a part of the minutes of
the board of directors’ meetings, and a copy of the signed certification, together with the credit
analysis and related information that was used in the determination, shall be retained by the Bank
in the borrower’s credit file for subsequent supervisory review. For purposes of this Agreement,
the term “related interest” is defined as set forth in section 215.2(n) of Regulation O of the
Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 215.2(n)).




     4. (a) Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Department an acceptable written plan designed to improve the Bank’s position through
repayment, amortization, liquidation, additional collateral, or other means on each loan or other
asset in excess of $2.5 million, including other real estate owned (“OREO”), that: (i) is past due
as to principal or interest more than 90 days as of the date of this Agreement; (ii) is on the
Bank’s problem loan list; or (iii) was adversely classified in the Report of Examination. In
developing the plan for each loan, the Bank shall, at a minimum, review, analyze, and document the
financial position of the borrower, including source of repayment, repayment ability, and
alternative repayment sources, as well as the value and accessibility of any pledged or assigned
collateral, and any possible actions to improve the Bank’s collateral position.




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          (b) Within 30 days of the date that any additional loan or other asset in excess of $2.5
million, including OREO: (i) becomes past due as to principal or interest for more than 90 days;
(ii) is on the Bank’s problem loan list; or (iii) is adversely classified in any subsequent report
of examination of the Bank, the Bank shall submit to the Reserve Bank and the Department an
acceptable written plan to improve the Bank’s position on such loan or asset.



          (c) Within 30 days after the end of each calendar quarter thereafter, the Bank shall submit a
written progress report to the Reserve Bank and the Department to update each asset improvement
plan, which shall include, at a minimum, the carrying value of the loan or other asset and changes
in the nature and value of supporting collateral, along with a copy of the Bank’s current problem
loan list, a list of all loan renewals and extensions without full collection of interest in the
last quarter, and past due/non-accrual report. The board of directors shall review the progress
reports before submission to the Reserve Bank and the Department and shall document the review in
the minutes of the board of directors’ meetings.



Allowance for Loan and Lease Losses




     5. (a) Within 10 days of this Agreement, the Bank shall eliminate from its books, by
charge-off or collection, all assets or portions of assets classified “loss” in the Report of
Examination that have not been previously collected in full or charged off. Thereafter, the Bank
shall, within 30 days from the receipt of any federal or state report of examination, charge off
all assets classified “loss” unless otherwise approved in writing by the Reserve Bank and the
Department.



          (b) Within 60 days of this Agreement, the Bank shall review and revise its allowance for loan
and lease losses (“ALLL”) methodology consistent with relevant supervisory guidance, including the
Interagency Policy Statements on the Allowance for Loan and Lease



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Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and
recommendations regarding the ALLL set forth in the Report of Examination, and submit a description
of the revised methodology to the Reserve Bank and the Department. The revised ALLL methodology
shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a
minimum, the reliability of the Bank’s loan grading system, the volume of criticized loans,
concentrations of credit, the current level of past due and nonperforming loans, past loan loss
experience, evaluation of probable losses in the Bank’s loan portfolio, including adversely
classified loans, and the impact of market conditions on loan and collateral valuations and
collectibility.




          (c) Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the
Department an acceptable written program for the maintenance of an adequate ALLL. The program shall
include policies and procedures to ensure adherence to the revised ALLL methodology and provide for
periodic reviews and updates to the ALLL methodology, as appropriate. The program shall also
provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis.
Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the
filing of the Consolidated Reports of Condition and Income, by additional provisions. The board of
directors shall maintain written documentation of its review, including the factors considered and
conclusions reached by the Bank in determining the adequacy of the ALLL. During the term of this
Agreement, the Bank shall submit to the Reserve Bank and the Department within 30 days after the
end of each calendar quarter, a written report regarding the board of directors’ quarterly review
of the ALLL and a description of any changes to the methodology used in determining the amount of
ALLL for that quarter.



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Capital Plan




     6. Within 60 days of this Agreement, Centrue shall submit to the Reserve Bank an acceptable
written plan to maintain sufficient capital on a consolidated basis and Centrue and the Bank shall
submit to the Reserve Bank and the Department an acceptable joint written plan to maintain
sufficient capital at the Bank as a separate legal entity on a stand-alone basis. The plans shall,
at a minimum, address, consider, and include, as applicable:



          (a) Centrue’s current and future capital needs, including compliance with the Capital Adequacy
Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A
and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);



          (b) the Bank’s current and future capital needs, including compliance with the Capital
Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure,
Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);



          (c) the adequacy of the Bank’s capital, taking into account the volume of classified credits,
concentrations of credit, ALLL, current and projected asset growth, and projected retained
earnings;



          (d) the source and timing of additional funds to fulfill the Bank’s future capital
requirements; and



          (e) the requirements of section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R.
§ 225.4(a)) that Centrue serve as a source of strength to the Bank.



     7. Centrue and the Bank shall notify the Reserve Bank and the Department, in writing, no more
than 30 days after the end of any quarter in which any of Centrue’s consolidated



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capital ratios or the Bank’s capital ratios (total risk-based, Tier 1, or leverage) fall below the
approved capital plans’ minimum ratios. Together with the notification, Centrue and the Bank, as
appropriate, shall submit an acceptable written plan that details the steps Centrue or the Bank, as
appropriate, will take to increase Centrue’s or the Bank’s capital ratios to or above the approved
capital plans’ minimums.




Funds Management




     8. Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the
Department an acceptable written contingency funding plan that, at a minimum, includes appropriate
adverse scenario planning and identifies and quantifies available sources of liquidity for each
scenario.



Earnings Plan and Budget




     9. (a) Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank and the Department a written business plan for 2010 to improve the Bank’s earnings and
overall condition. The plan, at a minimum, shall provide for or describe:



               (i) a realistic and comprehensive budget for 2010, including income statement and balance
sheet projections; and



               (ii) a description of the operating assumptions that form the basis for, and adequately
support, major projected income, expense, and balance sheet components.



          (b) A business plan and budget for each calendar year subsequent to 2010 shall be submitted to
the Reserve Bank and the Department at least 30 days prior to the beginning of that calendar year.



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Dividends




     10. (a) Centrue and the Bank shall not declare or pay any dividends without the prior written
approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation
of the Board of Governors (the “Director”) and, as to the Bank, the Department.



          (b) Centrue shall not take any other form of payment representing a reduction
in capital from the Bank without the prior written approval of the Reserve Bank.



          (c) Centrue and its nonbank subsidiaries shall not make any distributions of interest,
principal, or other sums on subordinated debentures or trust preferred securities without the prior
written approval of the Reserve Bank and the Director.



          (d) All requests for prior approval shall be received at least 30 days prior to the proposed
dividend declaration date, proposed distribution on subordinated debentures, and required notice of
deferral on trust preferred securities. All requests shall contain, at a minimum, current and
projected information on Centrue’s capital, earnings, and cash flow; the Bank’s capital, asset
quality, earnings and ALLL needs; and identification of the sources of funds for the proposed
payment or distribution. For requests to declare or pay dividends, Centrue and the Bank, as
appropriate, must also demonstrate that the requested declaration or payment of dividends is
consistent with the Board of Governors’ Policy Statement on the Payment of Cash Dividends by State
Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory
Service, 4-877 at page 4-323).



Debt and Stock Redemption




     11. (a) Centrue and its nonbank subsidiaries shall not, directly or indirectly, incur,
increase, or guarantee any debt without the prior written approval of the Reserve Bank. All




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requests for prior written approval shall contain, but not be limited to, a statement regarding the
purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an
analysis of the cash flow resources available to meet such debt repayment.




          (b) Centrue shall not, directly or indirectly, purchase or redeem any shares of its stock
without the prior written approval of the Reserve Bank.




Cash Flow Projections




     12. Within 90 days of this Agreement, Centrue shall submit to the Reserve Bank a written
statement of Centrue’s planned sources and uses of cash for debt service, operating expenses, and
other purposes (“Cash Flow Projection”) for 2010. Centrue shall submit to the Reserve Bank a Cash
Flow Projection for each calendar year subsequent to 2010 at least one month prior to the beginning
of that calendar year.



Compliance with Laws and Regulations




     13. (a) The Bank shall immediately take all necessary steps to correct all violations of law
or regulation cited in the Report of Examination. In addition, the Bank shall take necessary steps
to ensure future compliance with all applicable laws and regulations.



          (b) In appointing any new director or senior executive officer, or changing the
responsibilities of any senior executive officer so that the officer would assume a different
senior executive officer position, Centrue and the Bank shall comply with the notice provisions of
section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of
Governors (12 C.F.R. §§ 225.71 et seq.).




          (c) Centrue and the Bank shall comply with the restrictions on indemnification and severance
payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit
Insurance Corporation’s regulations (12 C.F.R. Part 359).




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Compliance with the Agreement




     14. (a) Within 10 days of this Agreement, Centrue’s and the Bank’s boards of directors shall
appoint a joint committee (the “Compliance Committee”) to monitor and coordinate Centrue’ and the
Bank’s compliance with the provisions of this Agreement. The Compliance Committee shall include a
majority of outside directors who are not executive officers or principal shareholders of Centrue
and the Bank, as defined in sections 215.2(e)(1) and 215.2(m)(1) of Regulation O of the Board of
Governors (12 C.F.R. §§ 215.2(e)(1) and 215.2(m)(1)). At a minimum, the Compliance Committee shall
meet at least monthly, keep detailed minutes of each meeting, and report its findings to the
boards of directors of Centrue and  the Bank.



          (b) Within 30 days after the end of each calendar quarter following the date of this
Agreement, Centrue and the Bank shall submit to the Reserve Bank and the Department joint written
progress reports detailing the form and manner of all actions taken to secure compliance with this
Agreement and the results thereof.




Approval and Implementation of Plans, and Programs




     15. (a) The Bank and, as applicable, Centrue shall submit written plans and programs that are
acceptable to the Reserve Bank and the Department within the applicable time periods set forth in
paragraphs 1, 2, 4, 5(c), 6, 7, and 8 of this Agreement.



            (b) Within 10 days of approval by the Reserve Bank and the Department, the Bank and, as
applicable, Centrue shall adopt the approved plans and programs. Upon adoption, the Bank, and as
applicable, Centrue shall promptly implement the approved plans and programs, and thereafter fully
comply with them.




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          (c) During the term of this Agreement, the approved plans and programs shall not be amended or
rescinded without the prior written approval of the Reserve Bank and the Department.




Communications




     16. All communications regarding this Agreement shall be sent to:




	 	(a)	 	Mr. Charles F. Luse

Assistant Vice President

Federal Reserve Bank of Chicago 
230
South LaSalle Street

Chicago, Illinois 60604
	 
	 	(b)	 	Mr. Scott D. Clarke

Assistant Director

Department of Financial and Professional Regulation

Division of Banking

320 West Washington Street

Springfield, Illinois 62786
	 
	 	(c)	 	Mr. Thomas A. Daiber

President and Chief Executive Officer

Centrue Financial Corporation

Centrue Bank

7700 Bonhomme Avenue

St. Louis, Missouri 63105





Miscellaneous




     17. Notwithstanding any provision of this Agreement, the Reserve Bank and the Department may,
in their sole discretion, grant written extensions of time to Centrue and the Bank to comply with
any provision of this Agreement.



     18. The provisions of this Agreement shall be binding upon Centrue, the Bank, and their
institution-affiliated parties, in their capacities as such, and their successors and
assigns.



     19. Each provision of this Agreement shall remain effective and enforceable until
stayed, modified, terminated, or suspended in writing by the Reserve Bank and the Department.



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     20. The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of
Governors, the Reserve Bank, the Department, or any other federal or state agency from taking any
other action affecting Centrue, the Bank, or any of their current or former institution-affiliated
parties and their successors and assigns.



     21. Pursuant to Section 50  of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the
Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818). This Agreement is also
enforceable by the Department under section 48 of the Illinois Banking Act.



     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the
18th day
of December, 2009.



	 	 	 	 	 	 	 	 	 	 	 
	CENTRUE FINANCIAL CORPORATION	 	 	 	FEDERAL RESERVE BANK OF	 	 
	 	 	 	 	 	 	CHICAGO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Thomas A. Daiber
	 	 	 	By:	 	/s/ Mark H. Kawa
	 	 
	 

	 	Thomas A. Daiber	 	 
	 	 	 	Mark H. Kawa
	 	 
	 
	 	President and CEO	 	 	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	CENTRUE BANK	 	 	 	ILLINOIS DEPARTMENT OF	 	 
	 	 	 	 	 	 	FINANCIAL AND PROFESSIONAL	 	 
	 	 	 	 	 	 	REGULATION	 	 
	 	 	 	 	 	 	DIVISION OF BANKING	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Thomas A. Daiber
	 	 	 	By:	 	/s/ Jorge A. Solis
	 	 
	 	 	Thomas A. Daiber	 	 
	 	 	 	Jorge A. Solis	 	 
	 	 	President and CEO	 	 	 	 	 	Director	 	 







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